Reply to When will these prices slow down??!!

Forum Index » Real Estate

Reply to "When will these prices slow down??!!"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous]

[quote=Anonymous][quote=Anonymous]

[b]The decrease in prices due to increasing interest rates is finance math. If interest rates rise, ceteris paribus, prices decrease. Talk to a bond trader if you doubt this. [/b]

[/quote]

This is a fallacy. Housing prices are not corporate bonds -- prices and yields do not move inversely. I realize a lot of people believe that once rates increase, prices will fall. Historically, that hasn't happened at all because housing prices are not that elastic. Yes, we've been in an unprecedented era of artificially depressed rates, but the Fed is going to move VERY gradually to normalize -- could take a decade or more. It will take greater economic strength to push rates up -- and greater economic strength generally translates to more buying power. So this idea that when rates rise housing prices will fall in tandem is just foolish and wishful thinking. Might it happen? Sure. Is it possible? Maybe at the margins. But is it likely? Not really.[/quote]

Missed the ceteris paribus I used before? I'm very familiar with the literature on how there isn't a lockstep negative correlation between interest rates and housing prices. I also know we are likely near the end of a decades long period of policies aimed at goosing assets prices. And absent increased household formation and increased household income (which, at the median has been in decline nationally for the last few years), there is an upper bound to the spending households can allocate to housing and that makes a break from recent experiences all the more likely.

While I'm trolling DCUM's many GS-14 Economists:
-Why, oh why do you have such confidence in the Fed? Especially if you are so committed to the idea of the recent past as being representative of the future? They've been behind the curve for quite a while and they control short term rates, not long term ones.

-And most importantly, given that my discourse on interest rate moves was driven by a desire to help the OP navigate a market that has been unkind to them, do you think there is any better course of action than for them than to increase their savings in something relatively risk free (treasury bond [funds] with maturities of 3yrs or less)? Especially given that at present, most of their future down payment is in home equity in their current townhouse? Please, if you feel the need to bicker about interest rates and their impacts on prices, also share some thoughts on what you would do financially in OP's situation.[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics